Idaho mine to start cobalt production in 2011 after winning federal approval

Company: Cobalt mining in Idaho to start in 2011

BOISE, Idaho — Mining for cobalt — an element used in hybrid car batteries and jet engines — could get under way in the central Idaho mountains in 2011, after a Canadian company said it won initial federal approval for the plan.

Formation Metals Inc. said Wednesday that winning the U.S. Forest Service’s blessing for the first stage of its operations plan means workers can log the mining site and build roads in January.

Chairman and Chief Executive Officer Mari-Ann Green said the Vancouver-based company aims to supply as many as 1,600 tons annually of 99.9 percent-pure cobalt to companies like United Technologies Corp.’s Pratt and Whitney unit, Rolls Royce Group Plc and Portland, Ore.-based Precision Castparts Corp.

Cobalt is used in jet engines, hybrid vehicle batteries, prosthetic knees and hips, even radio frequency identification tags that help retailers including Wal-Mart Stores Inc. track their products.

Mining is due to start in Salmon-Challis National Forest, about 200 miles northeast of Boise, in 2011 and could continue for 30 years, the company said.

Green expects to employ 150 at the mine and another 77 people at the company’s existing smelter 200 miles to the northwest in Kellogg, where the cobalt will be refined.

Though the price of cobalt dropped from about $52 per pound in 2008 to $18 earlier this year, optimism that the worst of the recession is over is again pushing prices higher. It traded at about $23 this week, Green said.

Canada’s Formation has been exploring Idaho’s Cobalt belt — the U.S. government bulldozed trenches here during World War II to recover the chemical element for use in aircraft engines — for 14 years.

Exploration companies are hunting for cobalt from Duluth, Minn., to Cuba to rich deposits in Africa’s Zambia and Congo, where much of today’s cobalt supply is mined.

Before this week’s milestone, its efforts have been hampered by a financial crisis that followed the Sept. 11 terrorist attacks as well as complicated dealings with Xstrata Plc, a Swiss-based cobalt producer that indirectly owns a defunct mine next door that’s on the federal Superfund pollution cleanup list.

In April, Xstrata lost a federal appeal aimed at halting Formation’s project. And three months ago, Formation won a separate state court order giving it access to cobalt mining claim across its Swiss rival’s property.

The Forest Service’s approval this week marks another significant development, even though additional work, including planning for mining below the water table as well as for facilities construction, remains to be completed, said Forest Service District Ranger Kimberly Nelson.

“There’s a lot of technical reporting information that still needs to be established and created before they can go underground,” Nelson said. “But this is a major step.”

So far, Formation has spent $50 million, including $17 million on permits.

To complete the mine by 2011, it’s finalizing a stock-and-debt deal with investors to raise another $140 million by the end of 2009, Green said.

Formation must put up reclamation bonds totaling $29.6 million to address eventual impacts of its mine and has agreed to chip in another $150,000 annually for the life of the mine for watershed improvement projects. In return, the Idaho Conservation League, an environmental group, agreed in 2008 not to challenge the mine in court.

The company has also worked with other groups including the Shoshone-Bannock Indian tribes to win support, Green said.

“We’ve gone that extra mile,” she said. “We’re quite proud of the fact that none of those fellows are appealing the project.”